What is a stock?

Gian Michael Simmons Productions

What is a stock?

A stock is simply a small piece of a company. A “public” company is one that has issued shares by selling them to the general public. Once those shares have been sold, investors can trade the stock among themselves on a market like the New York Stock Exchange or the Nasdaq.

When you buy shares of a company, you become a co-owner. As an owner, you have, in theory, a right to piece of the profits the company generates. But the ways those profits end up in investors’ pockets (if at all) will vary from stock to stock.

There are three sources of return from stocks. First is the dividends you get, second is growth in earnings and third is change in valuation.”

A company can pay out part of profits in the form of regular dividend checks, which may be paid quarterly or in the form of “one-off” special dividends. (Another way a company can give profits back to shareholders is by buying back some stock.)

But many very profitable companies don’t pay dividends at all. Instead, they reinvest profits back into the business in hopes of increasing earnings even more.

What is a mutual fund?

Put simply; a mutual fund is a pool of money provided by individual investors, companies, and other organizations. A fund manager is hired to invest the cash the investors have contributed, and the fund manager's goal depends on the type of fund; a fixed-income fund manager, for example, would strive to provide the highest yield at the lowest risk. A long-term growth manager, on the other hand, should attempt to beat the Dow Jones Industrial Average or the S&P 500 in a fiscal year

Closed vs. Open-Ended Funds, Load vs. No-Load

Mutual funds are divided along four lines: closed-end and open-ended funds; the latter is subdivided into load and no load.

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Thanks for visiting Gian Michael Simmons Productions. I am a retired 19-year Wall Street Wealth Advisor. I just wanted to share some brief comments regarding your finances, as they are important to me